Toward A Sensible Agricultural Policy
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Agricultural price supports and control of agricultural
output have become well ingrained in American farm policy today.
They have become so much a part of the policy picture, in fact,
that when changes in policy are discussed, only new means of

supply control or different (usually higher) levels of price
support are considered. Almost completely lost is the notion
or possibility of remaining price and control programs. It
is with a plea for honest and deliberate consideration of all
possible agricultural policies that this paper is written.
Past and present price support programs have been
based on the knowledge that the demand for farm products is
highly inelastic so that increases in aggregate output cause
decreases in total income to the farm sector of the economy.
This knowledge, coupled with the expressed desire of congress
to raise total farm income leads logically to the control of
output and its stable-mate price control. The inconsistency
is not in the conclusions reached, but rather in the expressed
goals of fare policy. The basic goal should not be to raise
total fare income. The sensible, and much more realistic goal
should be to increase per capital net farm income. This goal
can be accomplished without the endless continuation of artificial
price supports and supply controls and all the inefficiencies
concomitant with them.

The variables which affect total farm income are out.
put and price. To change total farm income it is necessary to

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change one or the other or both. A higher price is an incentive

for each farmer to increase his output. To raise prices
without simultaneously restricting output is not economically

feasible. On the other hand, to restrict output without,at

the same time, artificially raising prices seems to be politically

impossible (and probably economically impossible with the

mountainous surpluses the past support programs have created).

The variables affecting per capital net farm income,

in addition to output and product price, are factor prices,

efficiency of production and number of people farming. Any

control on factor prices can safely be omitted fromplanned

farm policy. Given aggregate farm output and product prices,

net per capital farm income can be increased by either or both

an increase in efficiency of production and a decrease in the

number of people farming. The historic trend for both has been

in the indicated direction. This trend, however, has been

retarded by our current and past farm policies.

Farm product prices which are pegged artificially

high encourage those farmers who, because of their relatively

small farms and restricted total resources, are less efficient
in production. Even though their costs are high, some profit is

possible because of the high price received for their products.

Acreage restrictions have little effect on these small producers.

A shift in a few acres fromone crop to another or from coop

production to idleness has little effect on their already high

costs of production. At the same time, they benefit little

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from product price increased because of their small output. Thus,

current farm policies tend to retard the movement of people

out of agriculture and encourage high cost producers, both of

which serve to lower net per capital farm income.

Suppose, for sake of argument, the government announced

that prices would be allowed to return to free market levels,

gradually, over a ten year period. That is, free market prices

ten years from now would be predicted and current support prices

reduced by 1/10 of the difference each year. (Adjustments

would have to be made from time to time, of course, but

essentially prices wuuld be known one to two years in advance.)

Acreage controls would have to be removed at the same rate and

over the same period of time. What effects would this policy

haveon the goal of increasing per capital net farm income and what

other measures would be made necessary to cope with the problems

which would arise. Finally, would the new problems be of

greater or less magnitude and burden than the problems we

presently face.

The effect of such a policy would be felt first by

the smaller, high cost producers. Prices would drop tobelow

their cost of production and without the promise of higher

prices in the future, they would be forced out of production.

This would free much needed land for expansion of the medium size

and longer producers and allow them to further reduce their

costs accordingly.

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The wheat and feed grain farmers of the Great Plains

produce crops which are among the most abundant in surplus and

present one of the biggest problems of adjustment. This group

of farmers should serve as a good example of what could happen

under the proposed policy.

Much of the land which is now cultivated in this area

and producing surplus and price supported crops should be returned

to grass and used for livestock grazing. (This statement should

not need to be documented). Much of this margninal land is in

the hands of the small farmer who cannot afford the out-of-pocket

cost of returning cropland to grass, let along the deferment of

income which necessarily results. If this land is shifted into

larger units, several factors will be inoperation that tend

to return this land to grass.

First, the price of wheat will drop relative to the price

of cattle (or other livestock) making thelivestock grazing

enterprises relatively more profitable. Secondly, the farmer with

more resources at his command is in a much better position to be

able to return cropland to grass. Because his income is larger

initially and because he has more assets, the current cash

expenses and income deferment required for regrassing are not

ruinous.

As this recombination of resources takes place, several

of the old "farm problems" are simultaneously alleviated. Land

is taken out of crop production and returned to grass reducing the

production of surplus crops. Livestock numbers are increased as is

consumption of feed grain another gain on the surplus. The

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of the period.

The most severe problem which would result from this

proposed policy would be the displaced farm people and their farm

assets. Except for the land involved, much of the remaining

assets would be old and depreciated machinery and equipment due

to the very nature of the reason these people were forced out

of farming. The capital loss for these assets would be slight.

The value of the land (either sale price or rental rate)

these people were abandoning could undergo a decline in the face

of declining farm prices and with a relatively large supply coming

on the market in a short period of time. Since it is the price or

rent received for this land upon which these people must depend

during their period of adjustment, it may be necessary to subsidize

land values to some extent. One effective means would be a

conservation or recreation reserve program. The governmental rental

or purchase rates would have to be high enough to allow a fair

trade, but not so high that neighboring farmers desiring to

expand could not afford the land.

Aland subsidy program would partially offset the need

for direct aid to those persons moving off the farm. However,

many of these people would require additional aid at least to

the extend of a subsidized re-education program. Relocation and

*A decrease in the farm labor force would be a movement along

the current production function. An expansion in farm size and

concurrent advanced in technology relative to a given labor

force would represent shifts of production function. Either change,

of course, would lead to more optimum use of labor if, as is argued,
farm labor is working for less than opportunity wages.